A damning internal audit report on Cheshire East's arrangements for managing and monitoring S106 agreements has revealed millions of pounds hasn't been allocated to agreed schemes.

A summary of the report to last week's meeting of the audit and governance committee stated eight contributions received between 2018/19 and 2021/22 totalling £5.8m were identified as unallocated.

This was one of many worrying issues unearthed, which has resulted in an overall assurance opinion for this review of 'no assurance' – the lowest which can be given.

The report states: "This reflects that there are currently significant areas of risk which are not being managed effectively in relation to the effective and efficient use of S106 agreements and contributions. This audit report findings relate to operational processes, governance, and a lack of strategic oversight in place for senior officers and service committees."

Section 106 (S106) Agreements are legal agreements between local authorities - like Cheshire East Council - and developers. (Image - Cheshire East HQ by Macclesfield Nub News)

S106 agreements are contracts between the council and developers to secure financial or other contributions to mitigate the impact of development.

Such agreements may include payments in lieu of direct provision, for example a financial contribution to education to fund additional school places necessitated by the building of new homes in an area. The money could also be allocated for highways schemes required to mitigate the impact of a development.

But the S106 contributions have to be used for the scheme they were allocated for and they have to be used within a specific timeframe.

If the money isn't used within an agreed period of time the developer has the right to request it back.

It is not known if Cheshire East has had to return funding – or how much – because the bulk of the discussion about the S106 review took place behind closed doors after members of the public were excluded on the grounds the debate may involve the likely disclosure of exempt information.

The Local Democracy Reporting Service was unable to attend the audit committee meeting on Thursday in Macclesfield to report what was said in the public session because Cheshire East scheduled a meeting of the environment and communities committee in Sandbach at the same time.

The main internal audit report has remained private but the summary which was publicly reported to the audit and governance committee is damning.

The headlines from the review include:

• Lack of clarity about roles and responsibilities across the 106 process;
• Insufficient oversight by senior management and members of S106 activity and delivery;
• Reference to 93 legacy agreements inherited from predecessor authorities. Of these, eight were time limited with only one recorded as being fully committed. The report says the seven remaining agreements had not been committed within the required deadlines and the developers may request repayment of any uncommitted balance. It adds should any monies be committed after the deadline, there is a risk that these amounts may need to be repaid at some point in the future.

The review also flagged up that internal audit had also previously reviewed S106 agreements in 2017/18 'and a significant number of findings from that audit are repeated, in full or in part in the current review'. Essentially, this means the findings from that review were not acted upon.

A number of actions which need to be taken were highlighted and the council is also to appoint a S106 officer.

A further update on the implementation of the recommended actions will be reported back to the audit and governance committee at a future meeting.